Low market turnover, high valuations, high cash balances and a lack of buy ideas suggest market risk is skewed to the downside

Low market turnover, high valuations, high cash balances and a lack of buy ideas suggest market risk is skewed to the downside. That's the view of Justin Braitling, CIO of Watermark Funds Management, who operates a 'market neutral' or 'long short strategy'. Braitling says, long only managers are siting on their portfolios and hoping that the markets, supported by liquidity measures, will continue to grind higher. If you look at turnover levels... the trends are quite concerning. Market turnover has fallen away quite dramatically this year. While long only managers are struggling to find new ideas, Braitling says their long/short strategy is providing plenty of opportunities - mostly on the short side. Interestingly, Mercer just published their fund performance tables for FY14 - with the best performing fund being Regal Funds Management who delivered a 38.8% return via a similar long/short strategy. Braitling explains where he is finding opportunities: